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Regular version of the site

Student
Title
Supervisor
Faculty
Educational Programme
Final Grade
Year of Graduation
Hanna Sakhno
An Evaluation of the Impact of ECB`s Unconventional Monetary Policy Measures on the European Labour Market
World Economy
(Bachelor’s programme)
2018
There has always been a heated debate in the literature on how monetary policy impacts the real sector. When interest rates in many advanced economies approached the zero bound or even entered the negative zone, many central banks resorted to unconventional monetary policy measures in order to maintain price stability and maximum employment. The channels of monetary policy transmission have become even more blurred and sophisticated. This Bachelor thesis investigates the effects of ECB`s balance sheet shocks on unemployment across the Eurozone countries in the long run. We employ a set of structural vector autoregression (SVAR) models for the period 2009m1 to 2017m7 and study the obtained impulse response functions and variance decomposition. We find that the influence for aggregated euro area figures is limited, however, our analysis demonstrates that there are strict differences in single policy responses across our sample states. Our outcomes suggest that ECB`s measures exert a significant pressing impact on unemployment in Germany, Spain and Italy in the long run. However, we find little or no evidence of the impact on jobless rates in the Netherlands, Finland and France. We attribute heterogeneity in policy responses across our sample countries to the lack of labour market mobility within the EMU. According to the optimum currency area theory (Mundell, 1961), labour mobility in a currency union per se may act as a significant adjustment mechanism that offsets imbalances in monetary policy responses. In addition, we test for spillover effects from ECB`s measures to the neighboring countries. Our analysis suggests that Polish unemployment is dependent on ECB`s balance sheet operations, as the zloty is pegged to the euro. The evidence for Switzerland demonstrates that there is no impact of ECB`s monetary policy shocks on national unemployment.

Keywords: unconventional monetary policy; Eurozone; unemployment; SVAR.

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